Investor letter: Multicoin Capital's hedge fund lost 91.4% in 2022; in November it said 10% of assets were stuck on FTX and it had exposure to FTT, SOL, and SRM
The fund's performance was severely impacted by direct exposure to now-bankrupt crypto exchange FTX and holdings in FTT and Solana-based tokens.
Context & Ripple Effects
Multicoin had previously been profiled as a crypto hedge fund whose returns outpaced bitcoin over 2017–19. Its 2022 letter instead ties a 91.4% loss to FTX-linked custody and token exposure after FTT’s November selloff and FTX outflows made contagion a market-wide concern.
The loss is part of a broader post-FTX fund retrenchment: Galois Capital’s closure after assets were trapped on FTX shows that impaired exchange access could force managers to return capital, while crypto-fund inflows had already fallen sharply in 2022.
First-order effects
- Multicoin’s investors absorb the reported 91.4% annual loss, with 10% of fund assets previously reported as stuck on FTX and additional exposure to FTT, SOL, and SRM.
- Multicoin’s prior performance record is overtaken by a concentrated failure across an exchange, its token, and affiliated ecosystem holdings.
Second-order effects
- Crypto-fund investors have a concrete basis to scrutinize managers’ exchange-custody arrangements and correlated token positions, particularly after Galois demonstrated the operational consequence of trapped assets.
- Managers seeking new allocations face a tougher fundraising environment when sector-wide crypto-fund inflows were already down sharply in 2022.
Third-order effects
- If FTX-related losses continue to reveal similar custody and concentration exposures, crypto hedge funds will compete more on asset segregation and risk controls than on token-selection records alone.
- The pattern widens the crypto-fund inflow downturn into a legitimacy problem for intermediaries whose investment and custody risks are tightly linked.
The trend: FTX’s collapse is turning crypto-fund performance stress into a broader reassessment of concentrated token exposure and exchange custody.